In a bearish report, investor confidence has been shaken. The global brokerage firm Goldman Sachs has set a target price of just ₹2.5 for Vodafone Idea. This signals a potential downside of up to 83%. This grim forecast has caused a significant drop in the company’s stock. The stock plummeted by more than 14%, hitting a low of ₹12.91 per share on the Bombay Stock Exchange (BSE).
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Key Concerns Raised by Goldman Sachs
Goldman Sachs has expressed several major concerns about Vodafone Idea’s ability to preserve competitiveness and improve its financial standing, including:
- Weaker Growth and Margins: Compared to its competitors, Bharti Airtel and Jio, Vodafone Idea’s growth trajectory is weaker. Its profit margins are also notably weaker.
- Weak Balance Sheet: Vodafone Idea’s balance sheet remains under pressure. This is particularly worrying in comparison to its rivals. This raises concerns about its long-term sustainability.
- Erosion of Market Share: Goldman Sachs forecasts that Vodafone Idea will continue to lose market share. A drop of 300 basis points is expected over the next 3-4 years.
- Free Cash Flow Break-Even: Achieving free cash flow break-even remains a significant hurdle for the company. This casts doubt on its financial future.
Goldman Sachs’ Target Price and Rating
Maintaining its bearish outlook, Goldman Sachs has reiterated a ‘Sell’ rating on Vodafone Idea shares. The firm has slightly revised its target price upward to ₹2.5 per share, up from ₹2.2, indicating a staggering downside of over 83% from current levels.
This gloomy prediction has further unsettled investors, prompting a rapid sell-off of the stock.
National Stock Exchange Live Vodafone Idea Share
Impact on Vodafone Idea’s Share Price
The release of Goldman Sachs’ report caused an immediate and sharp decline in Vodafone Idea’s stock price. It fell more than 14%, bottoming out at ₹12.91 on the BSE. By the time of writing, the stock was trading at ₹13.25 per share, reflecting a 12.19% drop.
This sharp decline highlights the ongoing challenges Vodafone Idea faces in maintaining market confidence. The company is amidst growing competitive pressure. Additionally, it is fighting an uphill financial battle.
Indus Towers Also Downgraded
Alongside Vodafone Idea, Goldman Sachs also downgraded Indus Towers from a ‘Neutral’ to a ‘Sell’ rating. They cited a disconnect between the company’s current stock price and its underlying fundamentals. After this downgrade, Indus Tower’s shares dropped by more than 6%.
Conclusion
The financial outlook for Vodafone Idea remains bleak. It struggles to contend with stronger competitors like Bharti Airtel and Reliance Jio. Goldman Sachs’ prediction of an 83% downside is worrying. The company faces significant challenges in growth, market share, and free cash flow. This suggests that the company’s stock continue to face downward pressure. Investors should approach with caution and seek professional advice before making investment decisions.
